Courtesy of ZeroHedge. View original post here.
First RBC, now Goldman.
After core CPI inflation was lower than expected for the third consecutive month, and the year-over-year rate fell two tenths to +1.7%, Goldman has made some changes to what it believes the Fed will report at 2pm today. It now expects the FOMC statement to include a stronger acknowledgement of the recent soft inflation data, and its expectations for the Summary of Economic Projections “have become incrementally more dovish.”
The details:
Given further evidence of a more persistent core inflation shortfall, we now expect this afternoon’s FOMC statement to include a stronger acknowledgement of the recent soft inflation data. Specifically, we expect the committee to drop the word “somewhat” from the inflation characterization (from ” inflation continued to run somewhat below 2 percent”).
As shown in Exhibit 1, we also now expect the Summary of Economic Projections to continue to show a median of 3 rate hikes in 2018 (vs. our previous expectation of an increase to 3.5 hikes), as the hawkish impact of governor Tarullo’s retirement is now expected to be offset by a shift of one of “4-hikers” to three hikes in 2018.
We also now expect the 2017 Core PCE projection to decline by two tenths to +1.7% (vs. our previous expectation of a one tenth downgrade).
These developments also increase our conviction that the committee will lower its long-term unemployment rate projection (to 4.6%).
Exhibit 1: Our Updated Expectations for the June Survey of Economic Projections